Reporting season is well under way, and we are seeing manufacturers with increased sales and revenues, but their profit margins under pressure.
This is largely because the sales performance is a result of bulging order books and supply chain bottlenecks which have prevented the factories from filling orders. We are aware of ongoing shortages, although the situation seems to be improving in many markets.
The question, of course, is whether the strong sales growth can be sustained, especially in a high-inflation environment. One hint that things may start to slow is the recently released economic activity report from the Institute for Supply Management (ISM). The latest index shows falls in order backlogs, new orders and prices. So, in the United States at least, it looks like after 29 consecutive months of economic growth, things are cooling down.